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Category Archives: Wine trends

“Gorgeous and totally juicy. Jam and sweet spices burst from the glass in this deeply resonant, expressive bottling.”

Grape juice is good, wine is bad — accepted wisdom for generations. After all, there’s a reason there isn’t a minimum drinking age for grape juice.

Which is makes this TV commercial for Welch’s grape juice so damned odd. It compares grape juice to red wine, noting that the juice has some of wine’s health benefits: “We’re not so different after all.” This is mind-boggling, and not just because it runs counter to the current wave of anti-drinking propaganda. Rather, it positions wine in the mainstream (and it’s a juice company doing it, for good measure): Comparing wine, which no kid is supposed to drink, to something every kid in the U.S. has had.

“Considering that roughly half the adults in this country don’t drink alcohol, it makes a certain sense,” says Michael Wangbickler, CEO & Partner, Balzac Communications & Marketing. “Since it’s become common knowledge that drinking red wine is good for your heart, they’re making a play for those consumers who don’t drink wine but want its health benefits.”

This ties in with Welch’s 2014 goal to promote a health and nutrition, says Wangbickler. That anything to do with wine is part of that message should make all of us who drink it smile. Just like a little kid at breakfast with a glass of grape juice.

The Wine Curmudgeon does not pretend to be a financial genius; witness my inability to make any money off the blog. But your recent foray into the wine business — Zipz single-serving wine and Beatbox flavored wine — is about something I know. For smart guys, you’re doing dumb things with your money.

Know just two things about the wine business, which should put these investments in perspective:

Second, that wine is not sold like other consumer goods, but through the three-tier system. This means that your entrepreneurs can’t sell their product to a retailer like Costco. The law in all 50 states requires them to hire a distributor to sell their product to the retailer. If they can’t find a distributor, and distributors are notoriously picky about what they represent, then it will never be sold in a store. I should also mention, thanks to three-tier, that it would be even more difficult to sell Zipz (which isn’t all that tasty) and Beatbox in Pennsylvania and New York, two of the largest wine markets in the country. The former doesn’t have any independent wine retailers, and the latter doesn’t allow wine sales in grocery stores.

I hope this helps the next time someone pitches a Shark Tank wine deal. And no need to thank me — it’s enough to know that I’m helping incredibly rich people not waste their money.

The perfect world of direct shipping — where we can buy any wine we want from any retailer we want, just like we buy computers or tennis shoes — will likely never happen, given the three-tier system and its death grip on the wine business. But, assuming we could make three-tier vanish, would direct shipping actually be that perfect?

Maybe. And then again, maybe not, says Steve Tadelis, Ph.D, an economist and Internet search expert at the University of California, Berkeley’s Haas School of Business. Tadelis’ research, summarized quite nicely in this article from The Economist, has found that consumers don’t necessarily use the Internet the way we think they should. His work, based on search patterns on eBay from people shopping for classical music, found that price or the music itself didn’t necessarily matter. Sometimes, they were searching just to search.

“They were looking for music not so much to buy music as to learn about music,” he says. “And when they bought something, it wasn’t always for the lowest price. And I can see that applying to wine, where buying isn’t as important as learning about wine.”

In other words, we may not care that direct shipping will make possible the ultimate wine retail experience. We may still buy wine the same we always have, or do it in some way no one has figured out yet. Tadelis says this is because we know little about how consumers use the Internet; after all, the idea of Internet shopping is still very new in comparison to the centuries of traditional retail. We assume, because it seems logical, that consumers will shop online the same way they shop in a store. But that’s not necessarily true.

“In hindsight, I shouldn’t have been surprised by our results, but I was,” he says. “But that’s because I based my assumption on my behavior, which is searching for the best deal on items that I know I want, and because traditional economic theory says search is a friction, and that shoppers try to avoid friction. But searching on the Internet isn’t the same kind of friction as driving from store to store.”

Further complicating the issue: Shipping costs, which don’t figure into music purchases, and the idea that wine is experential, which means we tend to buy something we’ve had before, based on our experience with it. With music, it’s not only easier to experiment with something new, but Mozart is Mozart, regardless of who is performing it.

Finally, the idea that direct shipping will lower prices, since it will increase competition and make it easier to find the same wine for less, may not be entirely true. In some cases, it could increase demand, which would raise prices as part of something economists call the long tail. If I make a rare wine without an apparent audience, and I can only sell it from my winery, demand is limited to the people who visit my winery. But if I sell it over the Internet, millions of people could learn about it, and I will be able to sell the wine more easily and at a higher price. This could lead, says Tadelis, to more experimentation and more unique and intriguing wines.